A whistleblower in Brazil has just received a $4.5 million award for his role in uncovering a kickback scheme allegedly run by a subsidiary of Zimmer Biomet Holdings Inc. (Zimmer Biomet), a medical device manufacturer. The tipster is a former orthopedic surgeon who became aware of the alleged misconduct while practicing medicine in his home country.
Based in Indiana, Biomet markets its orthopedic and dental implant devices on a global scale. The whistleblower, on the other hand, is a prominent surgeon in South America and former president of Brazil’s Orthopedic Sports Medicine Society. As it is customary with SEC whistleblowers, his name has not been made public.
In 2013, the whistleblower reported the alleged misconduct anonymously to Biomet executives. Within 120 days, he reported it to the SEC. According to his reports, the company was still running a kickback scheme in Brazil, in spite of having faced SEC penalties in the past for the same type of misconduct.
The defendant has been the target of a large-scale foreign corruption investigation spanning several years. The initial probe in the case targeted Biomet Inc. before Zimmer Holdings acquired the company in 2015. In 2017, Zimmer Biomet paid a $17.4 million criminal penalty for violating the terms of a deferred prosecution agreement. The misconduct involved bribes paid to government officials in Mexico and related violations of the FCPA (Foreign Corrupt Practices Act) in Brazil.
Biomet had first entered the DPA in connection with bribes allegedly paid to doctors in China, Brazil, and Argentina to induce purchases of Biomet devices between 2000 and 2008. At the time, the company paid $22 million to settle the kickback allegations.
With this track record, Zimmer Biomet did not wait to report the misconduct to the SEC after running its own investigation, which was prompted by the whistleblower’s tip. A subsequent SEC probe led to multi-million-dollar enforcement action.
Because the whistleblower played a key role in uncovering the violations, he was entitled to a share of the monetary penalties paid by Zimmer Biomet. When SEC whistleblowers provide tips that lead to penalties surpassing $1 million, they are entitled to an award between 10 and 30 percent of the total.
The Wall Street Journal reported that the $4.5 million paid to the tipster amounts to 15% of the monetary penalties in this case, which would thus amount to $30 million.
This is the first time an SEC whistleblower who first reported misconduct internally has received an award. As long as the SEC is informed within 120 days, these types of tipsters are eligible for awards under SEC rules. “In this case, the whistleblower was credited with the results of the company’s internal investigation, which were reported to the SEC by the company and led to the Commission’s resulting enforcement action and the related action. The whistleblower gets credit for the company’s internal investigation because the allegations were reported to the Commission within 120 days of the report to the company,” Jane Norberg, Chief of the SEC’s Office of the Whistleblower, said in a press release.
The Securities Exchange Commission has already paid a total of $381 million to tipsters since the inception of its Whistleblower Program.
"Today’s award will spur many would-be foreign whistleblowers to come forward now that they know that the SEC is committed to rewarding whistleblowers,” spokespersons for the Zimmer Biomet whistleblower commented.